Daily Current Affairs for 22nd May 2020

‘PLA blocking Indian patrols in Ladakh, Sikkim’

Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations.

Why in News:

New Delhi has rejected Beijing’s claim that Indian troops trespassed into Chinese territory, and accused the People’s Liberation Army (PLA) of hindering patrols by Indian soldiers.

Key points:

In the first such statement after weeks of stand-off between Indian and Chinese soldiers at four points along the boundary in Sikkim and Ladakh, the Ministry of External Affairs (MEA) also told China that peace and tranquility in border areas is an essential prerequisite to developing bilateral relations.

Doklam Issue:

The standoff between India and China at the Doklam plateau which lies at a tri-junction between the India, China, and Bhutan has gained much attention.

It has turned into the biggest military stand-off between the two armies in years.

It started when India (Indian Army) objected a road construction by the People’s Liberation Army (PLA) of China in the Doklam plateau which China claims to be a part of its Donglang region. However, India and Bhutan recognize it as Doklam, a Bhutan territory.

Later, China accused Indian troops of entering in its territory and India accused the Chinese of destroying its bunkers (People’s Liberation Army bulldozed an old bunker of the Indian army stationed in Doklam).

Although a military standoff was averted, diplomatic negotiations have not yielded many results to cool-off the passions across the border.

The disputed region is very close to India’s Siliguri Corridor which connects the seven north eastern states to the Indian mainland.

Background:

There were two incidents of face-off between Indian and Chinese troops recently which resulted in injuries to several soldiers on both sides.

The first incident occurred near Pangong Tso in eastern Ladakh while the second face-off occurred at Naku La in Sikkim.

Pangong Tso has seen such several incidents in the past including in 2017 and in 2019.

In September 2019, a scuffle broke out between Indian and Chinese soldiers on the bank of the Pangong Tso in eastern Ladakh but the matter was resolved through talks between the two militaries.

In one of the longest confrontations between the two sides, troops of India and China were locked in a 73-day face-off in Doklam from June 16, 2017, after the Indian side stopped the building of a road in the disputed area by the Chinese Army.

As per existing agreements between India and China, operation of fighter aircraft and armed helicopters is restricted to a distance from the LAC.

According to the ‘Agreement on Maintenance of Peace and Tranquility along the LAC in India-China Border Area’ of 1996, “combat aircraft (to include fighter, bomber, reconnaissance, military trainer, armed helicopter and other armed aircraft) shall not fly within 10 km of the LAC.

What are the various sectors on the India-China border?

India-China border is divided into three sectors:

The Line of Actual Control (LAC) in the western sector falls in the union territory of Ladakh and is 1597 km long,

The middle sector of 545 km length falls in Uttarakhand and Himachal Pradesh, and

The eastern sector falls in the states of Sikkim and Arunachal Pradesh. It is 1346 km long.

The middle sector is the least disputed sector, while the western sector witnesses the highest transgressions between the two

What exactly is a Chinese transgression?

A Chinese transgression across the border is recorded once the Indian border guarding forces in an area – either the Army or the ITBP – are “reasonably certain” that Chinese soldiers had crossed over to the Indian side of the LAC.

A Chinese transgression – in air, land or the waters of Pangong Tso lake – can be recorded, officials said, if it is visually observed by border posts, through use of surveillance equipment, in face-offs by patrols, indicated reliably by locals, or based on evidence left by the Chinese in the form of wrappers, biscuit packets, etc. to show their presence in an unmanned area.

Odisha adopts contract farming system

The Odisha Government has promulgated an ordinance allowing investors and farmers to enter into agreement for contract farming, in view of the continuing uncertainties due to the pandemic.

Key Points:

The ordinance is aimed at facilitating both farmers and sponsors to develop mutually beneficial and efficient contract farming system.

It argued the new system will improve production and marketing of agricultural produce and livestock while promoting farmers’ interest.

The State has, however, made it clear that no title, rights, ownership or possession of land or other such property will be transferred or alienated or vest in the sponsor or its successor or agent.

What is Contract Farming:

Contract farming involves agricultural production being carried out on the basis of an agreement between the buyer and farm producers.

Sometimes it involves the buyer specifying the quality required and the price, with the farmer agreeing to deliver at a future date.

Contract farming is allowed in most states like Gujarat, Maharashtra, Karnataka, Tamil Nadu, Haryana, Uttarakhand, Madhya Pradesh and West Bengal under the amended APMC Act, and companies and agencies have to seek permission or license in each state separately.

What are the Advantages of Contract Farming?

It will help increase income for farmers, particularly the small and marginal ones, as they will get better access to good quality inputs and better farm practices.

A deeper engagement between the farmers and food processors or retailers helps in guiding the farmers align the crop varieties, quality, farm management practices, etc. with what the market wants.

It will reduce the marketing risk for farmers due to pre-agreed prices and market assurance.

Way forward:

The government should focus on providing a successful model for farmers through well-defined legal provisions for Contract farming. The government should ensure the security of the growers, which requires buyers and the farmers to sign long term contracts so productivity and the crop quality are maintained through proper investments.Monopsony has to be avoided in contract farming since one company entering into an agreement with a large number of farmers puts the growers at a disadvantage.

Rating agencies can bypass curing period

Taking into account the practical issues faced by companies due to the COVID-19 pandemic, the Securities and Exchange Board of India (SEBI) has allowed credit rating agencies (CRAs) to bypass the 90-day curing period to revise ratings from default to non-investment grade.

What is the Issue:

While current norms bar CRAs from revising the ratings before 90 days, few companies were able to meet their payment obligations a few days after the due date due to COVID-19-related delays.

The rating agencies were, however, not able to revise the ratings due to the regulatory framework.

The rating could not be upgraded and continued to be under sub-investment grade due to the extant provisions on post-default curing period of:

90 days for the rating to move from default to speculative grade.

Generally, 365 days for default to investment

SEBI has said that CRAs can deviate from the said period of 90 days on a case-to-case basis, subject to the agencies framing a detailed policy in this regard.

Credit Rating:

Credit Rating is an assessment of the borrower (be it an individual, group or company) that determines whether the borrower will be able to pay the loan back on time, as per the loan agreement.

A good credit rating depicts a good history of paying loans on time in the past.

This credit rating influences the bank’s decision of approving an applicant’s loan application at a considerate rate of interest.

How does credit rating work?

Every credit rating agency has their algorithm to evaluate the credit rating.

Once the request for credit rating has been made, these agencies dig out the information and prepare a report based on such factors. Based on that report, they grade every individual or company and give them a credit rating.

Credit Rating Agencies in India:

CRISIL: Credit Rating Information Services of India Limited is the first credit rating agency of the country which was established in 1987.

It offers 8 types of credit rating which are as follows:

AAA, AA, A – Good Credit Rating

BBB, BB – Average Credit Rating

B, C, D – Low Credit Rating

ICRA: Investment Information and Credit Rating Agency of India was formed in 1991. It offers comprehensive ratings to corporates via a transparent rating system.

CARE: Credit Analysis and Research Limited (CARE) offers a range of credit rating services in areas like debt, bank loan, corporate governance, recovery, financial sector and more. Its rating scale includes two categories – long term debt instruments and short-term debt ratings.

ONICRA: Onida Individual Credit Rating Agency of India, established in 1993, offers credit assessment and credit scoring services to both individuals and businesses.

SMERA: Small Medium Enterprises Rating Agency of India Limited has two divisions – SME Ratings and Bond Ratings. It was established in 2011 and is a hub of financial professionals.